And if you have any questions, you can reach out to your Morgan Stanley representative. With that, I'm very pleased to welcome Constellation Brands and Garth Hankinson, Constellation CFO, to the fireside chat today. Thanks so much for being here, Garth.
Thanks, Dara.
So I thought maybe first we'd start. There's been a bunch of external changes with the U.S. elections. Maybe we can cover that first and the implications for your business. Realizing there's a lot of uncertainty, but just big picture, A, can you talk about the potential impact on your business if there were tariffs on Mexico? B, as you think about the potential offsets to that in terms of, the weaker peso pricing potentially on your business, cost savings which have been coming in, you know, much better than expected so far initially in your plans there. How do you think about the potential offsets if tariffs were to occur?
Well, well, thanks for the question, Dara, and thanks for hosting us. There's a lot there to digest. But you started with the disclaimer, so I'll start with the disclaimer. I think as probably many of you know that we just wrapped up our fiscal Q3. And as such, we're in a quiet period, so we will not be discussing any operating or financial results during today's conversation. And for any sort of forward-looking statements or GAAP disclosures, GAAP reconciliation disclosures, please see our website that you can find under STZ on the investor website. So with that housekeeping cleaned up, let's turn to the question.
First, just in terms of, you know, the tariff itself, and, you know, I'd start there by saying that, you know, we have a long history of building relationships with different administrations in both countries, both the U.S. and in Mexico. And as a result of this relationship building, I think that there's a really good understanding in both countries of the contributions that Constellation Brands makes to both the U.S. and Mexico. In the U.S., consumers benefit from our strong portfolio of beer brands. We deliver beloved brands with leading growth. We're providing growth for our distributor partners and our retailer partners, not to mention the impact that we have with farmers in Washington, Idaho, Montana, South Dakota, North Dakota. So material impact on American farmers. You know, not to mention other U.S.
Suppliers that help support our business, whether that's in packaging or logistics. You know, again, a material impact, you know, in the U.S., which is well understood among all of our stakeholders. I think it's also important to note that about 75% of our total inputs are U.S. denominated, USD- denominated. Many of those inputs sort of cross the border into Mexico for conversion into finished goods and then cross the border back for U.S. consumption. You know, again, very material impact here in the U.S. That said, as we're thinking about the implications of a potential tariff, it's a bit hard for us to assess what we would do next because there's no specificity yet on what a tariff might look like in terms of what's it covered, what's the duration, what would the amount be.
You know, that being said, you know, we're certainly not waiting for a specific policy to be put in place. We're working to identify and evaluate, as you say, the levers that we could pull if the tariff is actually put in place. I think you mentioned really, you know, the primary ones that are available to us. You know, one is, you know, cost savings. And so we're assessing can we achieve incremental cost savings above the accelerated $300 million worth of cost savings that we outlined just a year ago. And so, you know, there are a number of those things that we're assessing. We're looking at how quickly we could pull those forward, you know, what the impact, you know, would be. So that's certainly a lever that we continue to review.
Another is, you know, making sure that we have adequate inventories in the U.S., right? This is something that we have a little bit of experience in now that we've had to deal with some border closure disruptions due to surges in immigration. So, you know, we're making sure that we've got the right product in this country, which would certainly help, depending on the duration of any tariff. And then another area that we continue to assess is really pricing. What's the ability to take incremental pricing? I think it's important to note we look at incremental pricing. One of the things that we're going to want to balance is what's the right level of pricing so that you don't impact the top line, right? Certainly we have momentum in the top line.
We wanna maintain that momentum, because that drives so much more of the you know, the algorithm and the profitability of the business. So we don't wanna take any pricing that would, as I say, impair that. Again, each one of those levers and how we pull that would be dependent upon the specificities or the specifics, you know, of a tariff. So again, something we continue to wait on, but know that, you know, once we, you know, if a tariff comes to fruition, you know, we will have assessed what the opportunities for us are to either partially or fully offset the tariff.
Now, you know, in terms of potential policy implications for our business, if you think about the Hispanic consumer and what's in our, you know, in our algorithm that we shared a year ago, is we're gonna get about 20%-40%, or about, yeah, in that neighborhood, about 20%-30% of our growth is gonna come from demo favorable demographics. You know, that was based on U.S. census data and the base case for U.S. census data, which has the Hispanic legal drinking age population growing at kinda twice the rate of the broader legal drinking age. So it's not predicated on outsized immigration growth. So we don't think that that's, you know, a significant risk to our, to our algorithm, per se. And then finally, the last point you hit on was. Well, there's peso. Peso. I'm sorry. I forgot the peso.
You know, we've already seen a move, so.
So, on the peso.
With some of the hedging, it takes time to flow through. So how do you think about the timing of that and the impact to beer margins?
Yeah. So on the peso, just keep in mind that, you know, we have a multi-year hedging policy in place for currencies and commodities. We can start layering in hedges anywhere from three to five years out. The whole sort of strategy, if you will, of our hedging activities is to protect the P&L. So that's why we have a multi-year approach. You know, we don't try to be speculative in any way, shape, or form. Then I think as everyone is aware, we're about 90% hedged against the peso in our current fiscal year, fiscal FY25. Throughout this year, this calendar year, as we've seen some weakness in the peso, we have proactively layered in incremental hedges, not just for FY25, but for FY26, FY27, and FY28.
So, you know, you won't see necessarily in the near term a material impact from the weakening peso because of the way in which we've been. That's not to say there's not gonna be any impact because there obviously, well, if there's a change, if the peso, you know, weakens, you know, further, there certainly could be some upside. But right now, based on where the peso is, based on forwards, you know, this wouldn't be, you know, a material change. But keep in mind, the flip side of that is in our current fiscal year, you know, we didn't suffer a 16.50 peso. So, you know, that's kinda how you gotta think about, you know, the impact of the peso, taking into account our hedging strategy.
Great. Okay. On another topical issue, you've had a really strong track record and, and consistent beer top line growth over time. Depletions did decelerate a bit last quarter to 3.5% on a, on a days-adjusted basis. The full-year revenue guidance reflects that. Just put that in perspective for us, the softness you saw in the quarter and how you think about the business going forward relative to, to that result.
Yeah. I mean, I think as we outlined our updated guidance at the end of Q2.
You know, I think we were pretty clear that we saw that the slowdown that started over the summer, that we saw that as more transitory than structural, and that we saw that mostly being driven by macroeconomic headwinds, you know, if you will. As we now, you know, have had another, you know, quarter behind us, we still tend to think that the headwinds we're facing are permanent in nature, and there's certainly some improvements that we're seeing. There's reasons to be sort of cautiously optimistic, right? If you think about the macroeconomic background in the last three months, inflation appears to have crested, and the outlook for that is that that'll prove as we move into calendar year 2025.
We've had two interest rate cuts totaling 75 basis points, and the outlook could be for, you know, additional rate cuts this year and into next year, so over the longer term, that should be a tailwind for consumers. We've seen inflation get better. There's still some items in the basket that are elevated, which is causing consumers to be a bit pinched, but again, overall, inflation is improving, and the expectation for that next year is also relatively, you know, positive, and consumer sentiment got better in November, and then, you know, in reference to the last question you asked, you know, we've got the election behind us, so the election always provides some certainty and should ease some of the, you know, the concerns folks had with that being behind us.
You know, we've seen the improvement in Circana trends, which we think is reflective of the fact that the macroeconomic backdrop hasn't gotten worse, hasn't deteriorated, but we also think that it's reflective of some of the incremental investments that we've made in marketing to support, you know, the brands, again, that we laid out at our Q2. Most of that investment that we said that we were making in the second half of the year really was put in place in the third quarter. So as you think about, you know, our algorithm, we called that out specifically because that means that, you know, marketing is a bit out of the algorithm in Q3 given the incremental investment.
So, you know, based on the improving macroeconomic tailwind or the macroeconomic environment and the investments we're making, again, we feel like there's reasons for optimism. You know, that being said, I think that it's, you know, probably a good time to talk about, you know, what we're seeing, you know, in Circana, right? I mean, it's, you know, Circana, as we've told everyone before, captures about 50% of our total volume, so to speak. And, you know, the gap between Circana has been volatile, you know, so to speak, over the last couple of years, for a variety of reasons. You know, over the longer term period of time, that gap is typically in the low single-digit range. Again, last year, that was kind of in mid-single digits. Circana kinda changed the way that they account for convenience store, you know, performance.
And then this year, as we were overlapping that on the, for our first two quarters, that gap became almost, you know, nothing. That being said, again, back to the fact that Circana only captured about 50% of our overall performance, the 50%, you know, what we noted in terms of consumer behaviors that we saw in Q2 where consumers were shifting towards mass merchants and clubs to value-seek, we know that that was kinda coming from independents and the other non-tracked, you know, channels. So I think it's important for people to keep that dynamic in mind as they're looking at their Circana trends, you know, the recent Circana trends.
You know, a lot of that was driven by the higher unemployment that I referenced earlier, specifically the higher unemployment among the Hispanic consumer, which was particularly elevated and impactful in some of our larger markets like California and New York, which have a lot of independents that don't show up in the track data.
Okay. Great. That's helpful. And then looking at the long-term growth outlook at Investor Day, you discussed expecting about 40%-50% of long-term beer growth from distribution gains, 20%-40% from innovation, as you mentioned earlier, 20%-30% from demographics. So, just can you discuss if anything's changed over the last 12 months, confidence in each of those drivers, where you think you have the highest visibility?
Yeah. I mean, we still feel really good about all those drivers. You know, in terms of the distribution, as we laid out at Investor Day, you know, we expect to get 500,000 incremental points of distribution through FY28. We're making good progress. As you know, last fall, we had high single-digit gains in shelf space. This fall resets. We had double-digit gains in shelf space, and I think we're positioned nicely for the upcoming resets both this fall and next spring. You know, we still feel very good about the distribution opportunities that we have in front of us. You know, as you noted, I already mentioned the demographic headwinds. We feel good about that for all the reasons you said previously.
And then in terms of innovation, you know, we have a good pipeline. And, you know, 20 to 40 sounds like a lot, but I think it's important to note that for the last, you know, kind of five years, we've been generating about 30% of our growth from what we call innovation or, you know, NPD. We have a pretty broad definition, as you know, around innovation. That's not new-to-world product. That includes, you know, price pack architecture work or so, you know, incremental SKUs. It includes line extensions, for instance, if we, you know, add a new flavor to the Chelada lineup, as well as potentially, you know, new-to-world products. So we've got a good pipeline, you know, in place.
You know, we've referenced, you know, this year we had the launch or a more of a not quite nationwide, but you know a much broader launch of Aguas Frescas. We've got, you know, Sunbrew and test market for next year. So we feel good about the pipeline.
Great. If we can zoom in on your brands and the beer business, Modelo Especial has really been a juggernaut in recent years. Can you discuss the long-term growth runway there, for distribution expansion, perhaps geographic expansion, demographic opportunities with the non-Hispanic consumer, the key buckets that you see as the growth driver for that brand as you look out over the next few years?
Yeah. We, I mean, we remain very optimistic on the outlook for Modelo Especial, and you hit on all the you know relevant buckets, if you will. You know, distribution is gonna continue to be a major driver for Modelo Especial. This is a brand that, you know, is now the number one brand in dollar sales in the U.S., and yet it still is under-distributed versus its peers, including Corona Extra. You know, per our Investor Day, when we looked at the incremental 500,000 points of distribution across all regions other than the West region, 50% of those were gonna come from Modelo Especial.
Even in the West, where, you know, that's our, you know, our highest share market, most mature market, we're still expecting about 30% of the growth in that market, in terms of points of distribution to come from Modelo Especial. So there's a real opportunity there. In terms of geographic expansion or opportunity, you know, that this is a brand that we're seeing grow, you know, double digits in the business units outside the West and in the South, East, and Central, all growing double digits for Modelo Especial. You look at that on a more sort of market-level basis, we're now number one in 14 markets. We added Atlanta to the list of number one markets earlier this year. We're now number two in seven markets, adding Orlando over the summer.
We've added three markets where we're number three in, Richmond and Tampa and Jacksonville. And so I, you know, I call those out specifically because I think that, you know, when you see that we're growing in the Southeast, the South Central, the cities that I just referenced, that shows that the brand travels sort of beyond what one would see as kind of a more traditional, you know, obvious market for Modelo Especial. So, you know, very good growth runway. You know, also, I think it's important to note that, you know, our share in California for Modelo Especial is, you know, almost 20%, and then nationwide, it's, you know, closer to 10%. So, you know, good opportunity there. You mentioned the on-premise.
You know, the on-premise is, you know, we're the number four draft handle in the on-premise, and yet we're the number one, you know, beer brand by dollar sales. So that's certainly an opportunity for us. We're gonna continue to lean into the Fighting Spirit, you know, of the brand and that campaign, so to speak. That's been, you know, remarkably successful for us. But even though it has been, you know, as we look at the brand's unaided awareness relative to its peers, it's got room to get better. So, you know, we'll leverage that marketing campaign. And, you know, there's still price pack architecture work to be done, you know, on that, as well.
So that's a brand that we feel really good about in terms of the long-term, you know, runway. And again, you know, at our Investor Day, we laid out that we expect that brand to grow in the sort of mid-single to high single-digit range. And we got, you know, we got confidence in that.
Great. And you guys have spoken about Pacifico as kind of a young Modelo, so to speak. Can you discuss the growth strategy for Pacifico from here, maybe how it's performing in the core California market versus other markets? And, you know, what gives you confidence in, in the long-term growth potential for that brand? What are the key drivers there?
Yeah. We're excited about Pacifico. I mean, this is a brand that really, its roots are in California. It's kind of have a more, it's a more, you know, adventurous sort of brand essence, if you will. And it's certainly our most millennial, you know, brand. It certainly resonates with younger outdoors active, you know, active lifestyle, lifestyles. As you noted this, you know, the brand has been strong in the West, particularly in California. California and Texas are its two biggest markets. California, I would call it kind of a, you know, an existing mature market. Texas for this brand, a bit of an emerging market. But even in California, where it's now the number two brand in Southern California, still growing, you know, double digits in Circana, in the Circana track channel data.
So, you know, good, still good growth in a bigger, more mature market for us. Then you look at, you know, Texas, which is currently the second biggest market for us, growing very well there. But still, it's only the 29th largest brand in Texas. So there's still good runway for growth. Outside of those two markets, though, you know, our two biggest markets, this is a brand that we're gonna you sort of methodically grow from West to East. You know, as we said, you know, we wanna make sure that we're building that brand the right way, that we're generating real consumer pull. We want this to be an enduring brand growth story. We don't want this just to be all about pipeline fill that you then have to, you know, have to cycle.
You know, we'll certainly monitor the incrementality of that brand, to ensure that it's, you know, it's truly additive to the portfolio. And that will inform how we move across the U.S. But you know, the growth rates in Circana continue to be, you know, double digits. And that's what, that's the expectation that we have for the brand, low double-digit growth. Again, as we laid out at Investor Day, that brand really resonates. The color of that yellow, that can, kinda like a highlighter in the hand. I mean, that really resonates with consumers. And so again, you know, we're excited about the opportunity. On-premise is an opportunity for that brand that's grown nicely in the on-premise, but still room for the brand to grow there.
Certainly got price pack architecture opportunities for that brand. So, you know, we like where we're at with Pacifico.
Great. Can you discuss growth potential for the Corona brand family from here? What are sort of the baseline expectations for Extra, and the growth drivers for that brand? And how are Modelo and Pacifico as they're growing, interacting with Corona? Are you seeing more cannibalization, or are they really incremental, and maybe also just plans on Corona Sunbrew and, your level of enthusiasm there?
Sure. So just to, you know, in terms of the base expectations for Corona, you know, as we laid out, you know, again, I keep referencing, you know, our Investor Day a year ago, but as we laid out then, you know, we were expecting low single-digit growth for Corona. You know, in FY23, we had the benefit of us introducing some new pack sizes, which also opened up some additional consumer occasions for us. So in calendar year FY24, we are lapping a little bit of that, which has been, you know, a bit of a headwind, so to speak, for Corona. In addition to that, you know, Corona, like the rest of our portfolio, has had to deal with the macroeconomic backdrop, which, you know, slowed some growth, again, starting over the summer.
And then, you know, something that we don't always enjoy talking about, but if you look at where Corona's strong and mature in the East and in the Southeast, you know, we've had some challenging, you know, weather to deal with for that brand this year. That being said, I mean, if you look at the latest Circana trends, whether it's on a 12 or a 4-week basis, that brand has returned to growth. So, you know, we still feel like low single digit's the right way to think about that brand. You know, we're certainly continuing to invest heavily behind that brand. You know, I think that Pedro Pascal creative has been quite positive, kinda returning the creative back to like the brand's original, you know, roots, so to speak, if you will.
It's still America's most beloved beer brand, and so we, you know, we'll continue to, you know, to lean into that. It's a brand that, you know, we've doubled, you know, doubled down a little bit, you might say, in terms of advertising for the, you know, during the NFL this fall when the football season kicked off, as well as leaning into Major League Baseball. So, you know, we feel good about where that brand is and where it's headed, and we think we can get to that, you know, low double-digit contribution, you know, over the medium-term time horizon. As it relates to Sunbrew, I think, as you know, you know, we're in test market just in the Northeast right now.
You know, the results of that test market have been pretty positive. You know, we're at the point now where we've got enough information available for us that we're assessing, you know, what do we do with that brand next year in terms of, you know, how broadly do we extend it beyond the test market. So I think that that's something that we'll have more to discuss as we move further into the year. But, you know, cautiously optimistic based on what we're seeing in test market so far.
Great. And on Modelo and Pacifico, have you seen any changes in cannibalization rates over time? Just give us a little more insight there.
Not, not necessarily what I would call any material changes, but it is something that we're always, you know, watching. We're watching the interaction between those brands. And we do know, candidly, that there is some interaction between those brands. And that's why I say when we look at a brand like Pacifico, as we expand across the U.S., we're very mindful around what is the impact to Modelo Especial or what is the impact, you know, to, to Corona, to Corona. And so part of the expansion, decision-making, if you will, will be, hey, you know, if we think that there's interaction on a particular brand and that brand isn't necessarily mature in a market, maybe we don't, you know, maybe we don't introduce a new brand to that market, so that's the discipline that goes into it.
But I wouldn't say that there's, you know, any real material changes in cannibalization, just something that, you know, we continue to watch. And even with the cannibalization that we see in aggregate, you know, the growth we're seeing is additive overall to the portfolio.
Great. Modelo Chelada has been a very big growth driver over time. It's slowed a bit this year. What's your strategy to re-accelerate growth for the brand, which is kind of the centerpiece of, of your flavor strategy? And, is there maybe you can take a step back and just talk about flavor offerings either under the Modelo brand or in general and, and your strategy on that front?
Yeah. So Modelo Chelada, again, this is another brand that we, you know, feel good about. You know, this is a brand that's grown really nicely for us. You mentioned that, you know, growth seems to have slowed this year. You know, a lot of that has to do with the overlapping of a very successful new flavor launch last year. Last year, we introduced the watermelon flavor, which was just, I mean, it was extremely successful, more successful than sort of our past flavor, our new flavor offerings, new flavor introductions. So this year, when we introduced the strawberry, the new strawberry flavor, that performed more in line with our prior flavor offerings and not what we experienced last year with watermelon.
So that's created a bit of a tough overlap for Modelo Chelada. You know, that being said, I mean, if you look at the latest 12- and 4-week growth in Circana for that brand, you know, the trends are pretty positive there. And we're outpacing. You know, the growth for Modelo Chelada is outpacing broader FMBs as well as the broader Chelada category. So again, we think that you know, that brand still has a lot of runway for growth. You know, in terms of the flavor offerings more broadly, you know, obviously, as you referenced, Chelada is kinda like the cornerstone of that right now. But earlier this year, we more broadly expanded distribution for Aguas Frescas. And that's performing you know, in line with expectations.
And we're not seeing necessarily, you know, any overlap between, you know, an Aguas Frescas consumer and a Modelo Chelada consumer. They tend to be two different, you know, two different consumers and not, you know, cannibalistic of each other.
Okay, and wanted to touch on wine and now scaled down spirits business before we end. Obviously a challenging environment in the wine sector in general. You know, what's your confidence on the new goals you've outlined recently, and you've had the strategy to shift the portfolio towards the higher end. You know, when do you think that sort of tangibly starts to pay off for you, in light of these difficult industry conditions that you're facing?
Yeah. I mean, and, you know, and as Bill and I laid out at the beginning of the year, you know, we were taking actions and it was gonna take, you know, nine to 12 months before we really saw those actions start to have the tangible results we would all expect. And so, you know, we're kind of at that, you know, we're kinda close to that nine-month mark, if you will, from, you know, when we instituted some of the, you know, initiatives. I would say that, you know, we're starting to see those initiatives pay off if we look at brands like, you know, Kim Crawford and the Sauvignon Blanc and Meiomi and the base Pinot Noir and the Prisoner Red Blend.
The pricing and marketing actions that we took earlier this year, you're starting to see reflected in the Circana data. Now, unfortunately, you know, the way that pricing rules and regulations, you know, are on a state-by-state basis, you don't see the full impact of that right away, you know, because you take these pricing actions, they don't all occur all at one time. But again, we're starting to see the full benefit of that reflected in Circana kinda starting now. So that's, you know, that's a net positive. I'd say the same thing on the cost initiatives. You know, the cost initiatives that we put in place, those are starting to really bear fruit.
So, you know, you know, again, you know, we think that there's a real here inflection point in the second half and, and really in, in Q4, as that's when the full effect of, the commercial and the operational initiatives take full effect. Additionally, we're starting to see inventories, kinda become, you know, more stable as it relates to from a retailer and from a distributor perspective. So some of the destocking that we've seen seems to have kinda leveled off. So that'll be a positive for us in the balance of the year. You know, Q4 is always, you know, a bigger quarter for us, for the wine industry for a couple of reasons.
You know, one has to do with vintage releases, particularly as, you know, as we've shifted the portfolio to the more premium, you know, side of things. A lot of those vintage releases occur in the second half and specifically in Q4. Our direct-to-consumer business sees a pickup in Q4 as a result, not just of the vintage releases, but also because of the holidays, and so, you know, certainly we expect to have the benefits of those in Q4, so you know, we're again cautiously optimistic around the actions we've taken throughout the year and that those will start to really be more reflective in the results here in Q4 and going into next year.
Okay. Maybe we can turn to capital allocation. You've reached three times net leverage. You stepped up the repurchases in the first half of the year, $450 million. You've still got a large authorization in place. So how do you think about repurchases? The pace of buybacks from here, is it more consistent? The flexibility to be more opportunistic? You know, talk about that piece of capital allocation.
Yeah. I mean, as you mentioned, the priority for this year was to get our leverage ratio, you know, back to three times. We got there at the end of Q2. And the outlook for the full year is, you know, that will be certainly in line with that. So, you know, that was, you know, critical, you know, as a critical priority as, you know, as we've gone up to three and a half times post the AB sort of reclassification or declassification, if you will. You know, that being said, you know, we've continued, even with the focus on delevering, you know, we've been able to progress against all of our capital allocation priorities. In Q2, we returned $183 million to shareholders through dividends and over or almost $250 million through share repurchases.
That's on top of the $183 in dividends in Q1 and the $200 in share repurchases in Q1. You know, and we continue to build out the breweries in Mexico. So again, we're able to execute against all of our capital allocation priorities. You know, as we look at the balance of this year, I would say as it relates to share repurchases, you know, we're gonna continue to be opportunistic. You know, I know that in the recent past, we had a formal program in place. We don't currently have one of those, but that hasn't stopped us from being, you know, very disciplined and opportunistic as we've seen what we think is, you know, a dislocation in our share price. And so I would expect that you'll see more of that.
Okay. Great. And with the Svedka news this morning, how do you think about the role of M&A and divestitures in your portfolio and, going forward?
Look, I think the divestiture of Svedka was just a continuation of a, you know, multi-year sort of strategy to focus on the high end, as you say. I mean, we wanna be where the consumer not only is today, but where the consumer's going, and in wine and spirits, that clearly is in the more premium side of the business, and we've got a long history of taking a look at our portfolio and saying, "Do we have the right portfolio for ourselves?" and so, you know, that certainly informed the decision that we made to divest Svedka to Sazerac, which I think is a good transaction for both ourselves and, you know, for Sazerac.
You know, as it relates to M&A, you know, we've always said that M&A is going to be sort of the fifth priority, if you will, out of our five capital allocation priorities. You know, it's going to play, you know, a smaller role relative to the rest of the priorities, and it's really around, you know, portfolio gap filling, you know, sort of targets. I don't expect that you'll see, you know, many in wine and spirits, you know, in the near term, but, you know, it's something that we'll continue to assess the portfolio for both, you know, subtractions and additions.
Right. Okay. Constellation's been through a period of very pronounced changes in recent years, but board changes has shifted away from the Sands Family involvement, etc. Just taking a step back, among other factors, taking a step back, what do you think has changed the most in the last few years in terms of governance and the way you run the business, maybe what hasn't, and your perspective going forward on any cultural shifts in the organization?
Yeah. I mean, like, look, the biggest change really just has been the governance that you said. I mean, we've gone from, you know, being a, you know, two-share class company to being a single-share class. You know, this aligns all shareholders equally, you know, one share, one vote, so to speak. So that's, you know, absolutely, you know, a significant change in the history of Constellation Brands. You know, beyond that, you know, we now have an independent board chair, which who's brought, you know, a wealth of experience to the board, which is, you've been a great addition. We've assessed the board itself in terms of skill set and maybe some skill sets that were underrepresented, you know, in the boardroom.
As a result of that, we added two additional board members, who, with you know, true financial expertise, former CFOs, which I certainly you know, appreciate. We continue to look at the board composition to ensure that, you know, as we continue to go through, you know, time, you know, that we have the right board, we have the right skill sets, we have the right, you know, size of board. So that'll be just sort of, you know, ongoing. But I think that governance has been the biggest change. I think what hasn't changed is the performance of the company and the capital allocation priorities that we talked about earlier. You know, since this management team has been in place, the performance, the capital allocation priorities, the discipline that we have really hasn't changed.
the board, you know, the governance that we have in the board now is certainly supportive of the performance and those priorities, and is additive to the discussion. But those things haven't changed. I think that, as it relates to that disciplined capital allocation and performance, you know, one of the things that might be the most underappreciated part of the Constellation story today is this inflection point in capital of free cash flow generation, and what that means, you know, for us and for our investors. I think that results in us being a very compelling value creation story for investors.
Great. Well, that was very helpful. Thanks so much for being here today.
Thank you, Dara.